Mercuria Gas Bet Shows Traders See Gains in Romania

Mercuria Energy Trading SA’s investment in a Romanian energy producer shows how traders are looking to benefit from the country’s emergence as a natural-gas exporter in a less-regulated eastern European market.

The $50 million stake in Amromco Energy places the trading house in a region where gas prices are rising and state controls are easing to meet European Union demands for liberalization. Mercuria joins Vitol SA, the world’s biggest independent trader, in buying into the country as it prepares for exports that will ease Russia’s grip on energy supplies to its former satellites.

“There are significant opportunities within those eastern bloc energy and power markets which are going through a phase of liberalization,” said Matthew Gray, an analyst at Jefferies LLC in London. Mercuria would be well-positioned if Romania becomes a gas exporter. “It’s a case of first-mover advantage.”

Mercuria, the fourth-largest energy trader, bought a minority equity stake in Houston-based Amromco, the biggest independent oil and gas producer in Romania, the companies said in a statement Sept. 23. Amromco and Geneva-based Mercuria will also set up a commodities-marketing venture in Romania.

Mercuria is entering the market as Romania plans to raise gas prices for industry by 11 percent, and by 8 percent to 10 percent for households by the end of this year, according to the energy regulator. The move is part of a pledge to fully liberalize gas markets and to spur foreign investment.

Domino Discovery

Exxon Mobil Corp. and partner OMV Petrom SA have said they will invest several billion dollars in Romania’s Neptun block in the Black Sea, the site of last year’s Domino-1 discovery. The find showed potential output at about 630 million cubic feet a day, or more than half Romania’s daily production last year. The discovery is so substantial it “will probably secure our total energy independence from 2018” and allow gas exports to the region, Prime Minister Victor Ponta said in July.

Romania will be able to export to Hungary via the Arad-Szeged pipeline by December, Transgaz SA, the country’s grid operator, said on its website.

Closely held Amromco has already started “virtual” exports by swapping contracts with buyers in Hungary, Rob Kendall, the company’s executive vice president, said by phone from Houston on Sept. 24.

Amromco, producing about 25 million cubic feet equivalent a day, accounts for about 3 percent of Romania’s gas production, a share set to rise to 5 percent as new projects come online.

Romgaz, Petrom

Romania’s energy output is dominated by state-owned Romgaz SA and Petrom, controlled by Austria’s OMV. The government has said it will sell 15 percent of Romgaz in an initial public offering slated for November.

Amromco has had a joint-venture agreement with Romgaz since 2003 and recently purchased three oilfields from Petrom in northeastern Romania.

Vitol, which holds 16.1 percent of Sterling Resources Ltd., a stake valued at C$37.8 million ($36.7 million) at the close on Sept. 27, abandoned plans in May for a takeover of the Calgary-based explorer, which has assets in Romania and the U.K.

Vitol recently opened an office in Bucharest and won a license to trade power in Romania, Andrea Schlaepfer, a company spokeswoman, said by phone.

Before it's here, it's on the Bloomberg Terminal.